U.s. Fires 1st Salvo On Trade

New Duties Would Triple Prices On European White Wine

November 06, 1992|By Michael Arndt, Chicago Tribune.

WASHINGTON — The Bush administration, retaliating on behalf of Midwestern farmers, said Thursday it would impose price-tripling import taxes on $300 million of French white wine and other agriculture products from Western Europe.

The tariffs would go into effect in a month. Administration officials said they would be followed by punitive duties on as much as $700 million more in imports from the European Community if it does not give in to U.S. demands to slash its farm subsidies.

The impact of the tariffs, however, may be much greater than the figures imply. The European Community warned it will counterpunch with matching tariffs on imports from the United States.

If these actions block too much trans-Atlantic trade, they could further depress the world economy.

Moreover, the intensifying wrangle between the U.S. and the 12-nation European Community- the world`s two biggest economies and exporters-threatens to halt negotiations among more than 100 countries to expand global trade.

``The most important thing for the economy is accelerating world growth, and trade restrictions do the opposite,`` said Alan Wolff, an international trade attorney and former Carter administration trade negotiator. ``But the tariffs seem to have been unavoidable.``

American consumers, at least immediately, are unlikely to see higher prices on white wines from France, Germany and Italy.

Because the administration first signaled its plans to impose the tariffs in June, importers have had plenty of time to stockpile European wines.

Chateau and Estate Wines Co., a New York-based subsidiary of Seagram Co., has imported enough extra wine to meet normal demand for five months, said Abdallah Simon, its chairman.

Brown-Foreman Corp., a Louisville-based whiskey-maker and Italian wine importer, began accelerating its shipments last summer, which ``will mitigate the short-term negative effects of a trade dispute,`` said Chairman W.L. Lyons Brown Jr.

Thursday`s announcement by U.S. Trade Representative Carla Hills came two days after an 11th-hour round of talks broke off in Chicago between U.S. Agriculture Secretary Edward Madigan and Ray MacSharry, the European Community`s agriculture commissioner.

The European Community`s response is likely to be swift. At a meeting Monday, foreign ministers from the 12 nations are expected to approve imposing comparable duties on $300 million of U.S. goods the day after the U.S. tariffs become effective.

Despite warnings of retaliation, President Bush said the administration isn`t looking for a trade war with Western Europe, the nation`s top trading partner.

``No trade war,`` Bush said at the start of a Cabinet meeting Thursday.

``Just looking after the interest of world trade.``

The administration did not consult with President-elect Bill Clinton, who will inherit the dispute unless it`s quickly resolved, before deciding to impose the tariffs.

But Clinton indicated he had no differences with the administration. Speaking to reporters in Little Rock, Ark., Clinton said: ``We`ve got one president. He has to make those decisions. I don`t want to get in the way.``

In addition to white wine, the European products that will be hit with 200 percent tariffs are rapeseed oil, which is used in cooking, and wheat gluten, an animal feed. The United States imports little of these two farm products, however.

The European Community may still avert the tariffs. If the group agrees to reduce its subsidies to soybean growers-which has swelled European production and lessened the need for U.S. exports-Hills said the

administration wouldn`t start imposing the import tax.

But she said there would be no grace period. ``We have shown tremendous patience,`` Hills said at a press conference. ``There was nothing more the United States could do. Either we stop now and say the multilateral trade system doesn`t work or we take the next step`` and impose sanctions.

The tariffs stem from a 5-year-old dispute between the United States and the European Community over its generous payments to soybean farmers, which the administration calculates are depriving U.S. farmers of $1 billion of soybean exports annually.

The subsidies have resulted in more than a six-fold increase in European soybean production from 1980 to 1991.

U.S. exports have consequently sunk. In 1980, the United States exported 17 million metric tons of soybeans worth $4 billion to Western Europe. Last year, these exports totaled just 5.2 million metric tons worth $1.23 billion. The Midwest has been hurt by the sales dropoff, which has undercut prices and farm income. Illinois is the nation`s biggest producer of soybeans, followed closely by Iowa.

Soybean prices declined further Thursday, as traders figured the tariffs would diminish chances of a settlement that would lead to more European orders. On the Chicago Board of Trade, the contract for November deliveries of soybeans plunged 7 3/4 cents, to $5.43 1/2 a bushel.